Understanding Section 24: Schemes, Subsections, and Investment Opportunities

A Comprehensive Guide to Section 24: Schemes, Subsections, and Investment Opportunities

Section 24 of the Income Tax Act, 1961, deals with the deduction of interest on housing loans. The section provides several schemes and opportunities for taxpayers to save on taxes. Let's take a closer look at the subsections, schemes, and investment opportunities provided by Section 24.

Section 24

Section 24 of the Income Tax Act, 1961, which deals with the deduction of interest on housing loans. It covers the various subsections of Section 24, including the deduction of interest on housing loans and pre-construction interest. The blog also discusses the schemes provided under Section 24, such as the Pradhan Mantri Awas Yojana, affordable housing, and the reverse mortgage scheme. Additionally, it explores the investment opportunities available under Section 24, including real estate investment, fixed deposits, and the Public Provident Fund. By understanding the various opportunities provided under Section 24, individuals can make informed decisions to save on taxes and secure their financial future.

• Subsections of Section 24:

  1. Section 24(b) - Deduction of Interest on Housing Loans

     Individuals have the option to claim a deduction of up to INR 2 lakhs on the interest paid for housing loans taken on self-occupied properties under this particular subsection.For loans taken on a rented property, there is no upper limit on the interest deduction. This deduction is available only if the construction of the property is completed within five years from the end of the financial year in which the loan was taken.

  2. Section 24(c) - Pre-construction Interest

     This subsection deals with the interest paid on housing loans during the pre-construction period. Individuals are eligible to claim a deduction for the interest paid during the pre-construction period, up to a maximum of Rs. 2 lakhs. This deduction is available in five equal installments, starting from the financial year in which the construction of the property is completed.

Important Points to Keep in Mind When Claiming Deductions under Section 24

Section 24 of the Income Tax Act provides tax deductions on the interest paid on housing loans. While claiming deductions under Section 24, it is important to keep the following things in mind:

• 1. Loan Purpose:

     The deduction is available only for the interest paid on housing loans taken for the purpose of acquiring, constructing, repairing, or renewing a residential property. Loans taken for any other purpose, such as business or personal loans, are not eligible for deduction under Section 24.

  2. Property Type:

     The deduction is available only for residential properties and not for commercial properties. The property should also be used for personal or self-use and not for rental income or business purposes.

  3. Loan Completion:

     The deduction is available only if the construction of the property is completed within five years from the end of the financial year in which the loan was taken. If the construction is not completed within this period, the interest paid on the loan during the pre-construction period can be claimed as a deduction under Section 24(c).

  4. Loan Amount:

     The maximum deduction that can be claimed under Section 24(b) is Rs. 2 lakhs for a self-occupied property. For a rented property, there is no upper limit on the interest deduction. However, the loan amount should not exceed the value of the property.

  5. Joint Ownership:

     In case of joint ownership of the property and the loan, both the owners can claim a deduction of up to Rs. 2 lakhs each on the interest paid on the loan.

  6. Pre-construction Interest

     The interest paid on the loan during the pre-construction period can be claimed as a deduction under Section 24(c). The deduction is available in five equal installments, starting from the year when the construction of the property is finished, and the interest on the housing loan can be claimed as a deduction.

  7. Additional Deductions:

     Individuals can also claim an additional deduction of up to Rs. 1.5 lakhs on the interest paid on housing loans for affordable housing under Section 80EEA.

  In conclusion, claiming deductions under Section 24 can help individuals save on taxes. However, it is important to keep in mind the purpose of the loan, the type of property, the loan completion period, the loan amount, and the joint ownership of the property and the loan. Additionally, individuals can also claim additional deductions under Section 80EEA for affordable housing.

Maximizing Your Tax Benefits: Schemes under Section 24:

Here are some of the popular schemes under Section 24:

• Schemes List

  1. Pradhan Mantri Awas Yojana (PMAY):

     The Pradhan Mantri Awas Yojana (PMAY) is a government initiative with the objective of making housing affordable and accessible to everyone.The scheme provides credit-linked subsidies on home loans to individuals belonging to the economically weaker sections (EWS), low-income groups (LIG), and middle-income groups (MIG). Under this scheme, individuals can avail of interest subsidies of up to 6.5%.

  2. Affordable Housing:

     The government has also provided various tax incentives to promote affordable housing.A deduction of up to Rs. 1.5 lakhs is available on the interest paid on housing loans for affordable housing. This deduction can be claimed separately from the deduction available under Section 24(b), which allows for a maximum deduction of Rs. 2 lakhs on interest paid towards a housing loan for a self-occupied property.

  3. Reverse Mortgage Scheme:

     The Reverse Mortgage Scheme is a financial product designed for senior citizens who own a property. Under this scheme, senior citizens can mortgage their property to a bank or a housing finance company in return for a regular stream of income. The interest paid on the mortgage is tax-deductible under Section 24.

Investment opportunities under Section 24:

Apart from the above schemes, there are other investment opportunities that are eligible for tax deduction under Section 24.

• Investment List

  1. Real Estate Investment:

     Investing in real estate is a popular investment option under Section 24. One can avail of a deduction of up to Rs. 2 lakhs on the interest paid towards housing loans taken for the acquisition of a self-occupied property. Additionally, investing in real estate can provide capital appreciation and rental income.

  2. Fixed Deposits:

     Fixed deposits are a type of investment that offers low-risk and predictable returns. Banks and financial institutions offer fixed deposits with varying tenures and interest rates. Individuals can invest in fixed deposits to save on taxes under Section 24.

  3. Public Provident Fund (PPF):

     PPF is a long-term investment option that provides tax-free returns. The investment made in PPF is tax-deductible under Section 80C of the Income Tax Act. Individuals can invest in PPF to save on taxes and earn tax-free returns.